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Derek Lowe's commentary on drug discovery and the pharma industry. An editorially independent blog from the publishers of Science Translational Medicine. All content is Derek’s own, and he does not in any way speak for his employer.

Out of Ideas?

The Wall Street Journal came out with a series of articles on innovation in the US, and the biopharma industry features quite a bit in them. The lead one is an overview, with the theme of “The US economy’s hidden problem is that we’re out of big ideas”, and there’s another one specifically on Sanofi and Warp Drive Bio (if you’re having trouble seeing those, try getting to them via Google News).

It makes some good points, but I’m starting to feel the effects of experience at this point in my life. By that, I mean that I’m pretty sure that I’ve read similar stories in the past – in fact, I’m asking whoever does the “Pessimist’s Archive” account on Twitter (I have my own suspicions) to see if they have examples from decades past. What the paper has in mind, though, are effects on the standard of living:

Economies grow by equipping an expanding workforce with more capital such as equipment, software and buildings, then combining capital and labor more creatively. This last element, called “total factor productivity,” captures the contribution of innovation. Its growth peaked in the 1950s at 3.4% a year as prior breakthroughs such as electricity, aviation and antibiotics reached their maximum impact. It has steadily slowed since and averaged a pathetic 0.5% for the current decade.

Outside of personal technology, improvements in everyday life have been incremental, not revolutionary. Houses, appliances and cars look much like they did a generation ago. Airplanes fly no faster than in the 1960s. None of the 20 most-prescribed drugs in the U.S. came to market in the past decade.

This is partly correct, but partly misleading. The article itself goes on to mention some good reasons why – some of the innovations are doing good in ways that don’t show up in GDP (such as cleaner air and water), and some of them take a long time to kick in (for example, it was decades after the electric light bulb that electricity really began to make a noticeable difference in the economy). I’m going to dig into the archives myself to see how the 20 most-prescribed drugs look over the years. In that case, though, I wonder if there has been a slow change over time, because in pharmaceuticals, as in several other fields, there’s what’s been called the “better than the Beatles” effect. Good drugs are good drugs, no matter how old. Aspirin and ibuprofen still sell in huge amounts, and why not? As former prescription blockbusters go generic, the barriers to entry really do get higher every year.

That’s a general phenomenon. To pick some of the examples in that quoted paragraph above, look at (say) home appliances. Inventing the washing machine and the dishwasher – those were big steps. Their designs have become optimized over time, and it’s hard to see how some completely new disruptive technology will shake them up – spraying warm soapy water on plates really does seem like the best way to get them clean, and a lot of us have tended to eat off plates. As for airplanes, that 1960s date skips over the 1970s and 1980s, when supersonic passenger planes were flying – but at a huge loss. Aircraft design is another one of those areas that becomes progressively harder to improve on, although (and some of these are also non-GDP effects) the current planes use less fuel, carry passengers less expensively per capita, and are quieter than the ones in the 1960s. (It should also be noted that we’re also flying over ten times as many passenger miles as back then, too).

So to some extent, it’s true that huge technological disruptions may well become harder to realize over time. Tyler Cowen talked about this in The Great Stagnation, which is a good place to read up more on the whole issue that these WSJ articles bring up. The gains that the industrialized countries have realized from switching away from agriculture, educating the broader population for the first time, introducing things like clean water and electricity, automobiles, and so on are hard to reproduce. Those were huge, and they affected a lower baseline. But in the same way that many people didn’t see some of those things coming, there are likely to be things that we’re not picking up on, either. A separate (but important) issue, as mentioned above, is whether or not GDP is an appropriate way to measure some of these changes or improvements, too.

What about the drug industry, then? That Sanofi/Warp Drive Bio article is interesting, and presents a good inside view of what’s been happening with that collaboration, which made a big splash at the start. I’ve wondered over the years how things have been going there, and the article makes clear that (as is so often the case) the company has had to adjust to research reality along the way. As it stands, they’ve delivered a set of potential antibiotic leads to Sanofi, and I hope that something comes out of that – it’s interesting work and good science.

But the whole thrust of the article, and the reason it’s part of this particular series, are a bit off, from my perspective. I think the idea is supposed to be that the big companies are out of ideas, and that they’re frantically trying to “outsource the science” to those few startups who can think of something. Now, in a bad mood, this sounds fairly plausible. But big companies have been doing deals with smaller ones in this field for a long, long time now. There are so many things to work on that one company just can’t cover them all. And many of these ideas (when a smaller company goes after them) turn out to be too expensive for them to pursue on their own funding. “Outsourcing the science” is not some new phenomenon brought on by creative exhaustion: it’s just, well, science. Smaller companies are a key part of the ecosystem, because they are constantly forming around new ideas, often risky ones (and constantly evaporating when those ideas don’t pan out). But that isn’t a new thing, either.

This is one of those “not a bug but a feature” things, in other words. Rather than a symptom of general played-outness, seeing big drug companies doing deals with smaller outfits is a sign that everything is working as it should. We should panic if that stops.

54 comments on “Out of Ideas?”

Except bigger firms seem to have given up on the idea of doing R+D at all – they want someone else to do it, cheaper, and they don’t seem to particularly care whether it’s any good or not.

Academia is optimized for publications, and novel ideas, but not products, and using them as a source of products doesn’t seem to be driven as much by the need to find new ideas as the need to find some way to get those R+D costs off the books. (DuPontDow seems to be another example of that.) Relying on academia is also problematic in that it is supposed to train scientists so they can go on and do useful things, but if the places at which they could do useful things don’t have any jobs (because they’re counting on trainees to do), then there aren’t going to be any trainees to do the work (or you’re going to be training people to come here for cheap research and go back home, which seems to be contrary to the purpose of the funding sustaining much of their research).

The startup ecosystem is useful for people who want risk and excitement, but for lots of people, that isn’t what they want, and so having no choice but to work in them will lower the number of people who want to do research. In addition, the outcomes of startup employees seem to all end in unemployment, whether or not they succeed at the company’s goal. I can’t imagine that the flow of people willing to play under those conditions is likely to be endless, unless the work ceases to be cheaper than other ways of doing research.

The reliance on someone else to do the research cheaply seems to have increased, and if you’re mainly concerned about price, you can’t be too concerned about what you’re getting for it. If it doesn’t matter to the people running the companies (even though it’s the source of their business), that sounds like giving up to me.

Bang on. The startup model has now degenerated into elaborate pump-and-dump (Tharanos, anyone?) and outsourcing is a symptom that every CEO wants to be running a hedge fund, not a productive corporation. Keep outsourcing core competencies and sooner or later you find yourself with a building full of contract monitors and no competency.

IMHO, it’s not simply a shortage of ideas, it’s a refusal to put money back into the enterprise to allow nascent ideas to be nurtured into products. Rentiers rule today, as well documented by this insightful paper from the Roosevelt Institute: http://bit.ly/1GJvOC4

Antibiotics aside, good drugs continue to build patient populations for decades because they keep the old patients alive and recruit new ones, as long as no bad news comes to light. That is the value of years of experience of a medicine, but improved safety, like clean air and water, is not recognized as innovation, whereas new mobile phones that catch fire are truly novel!

The problem with antibiotics is not how to invent them; it is how to get paid for them while they have licence protection. The policy of keeping new antibiotics back until older drugs have been exhausted makes good sense to clinicians and payers, but is a very poor incentive to invent and develop them, while copying and misuse leads to resistance developing even before the inventor has a ROI.

The situation for vaccines is different – supplier(s), development, production and pricing are usually agreed up-front in national programs. This is probably a better paradigm for infection control in a population. However, the deal that Roche got for stockpiling tamiflu back in 2005 was controversial enough to stop that happening again in a hurry.

Meanwhile, investment has been poured into real estate and away from work. No messy innovation needed.

The $1 or 2 billion (+ good will/publicity) pumped into malaria seems to be delivering several excellent NCEs and vaccines in an an area previously deserted by pharma, and exploring the best ways to use them in combinations with existing drugs. There is a similar story for neglected tropical diseases and for tuberculosis, so it seems to me that money is the solution.

I think there’s something of a “fish don’t realize they’re wet” phenomenon going on right now. As of now we are in the midst of a revolution in communications – for the first time virtually everybody on the planet can communicate directly with virtually everybody else on a near-instantaneous basis. And that same device let’s me carry the complete works of Shakespeare, Mozart, and Stan Lee in my pocket. This is affecting society and science in ways that we don’t currently understand and probably can’t predict.

Secondly, I think that the airlines example is a pretty good example of what’s happening in medicine right now. The innovations in air travel weren’t about making flying a better experience for a chosen few, but to make flying a reasonable option for more people. It’s the system as a whole that becomes more efficient through network effects rather than any single element.

In 1973 my grandmother received a cardiac bypass. She was in the hospital for over three weeks, and that was because she was fortunate enough to live in a city with a hospital that performed that operation. Last month a friend of mine had a stent put in and was in the hospital two nights, in a hospital that’s an hour-and-a-half drive from any city over 25,000 population. This is not stagnation by any reasonable definition.

Another example, we can now deliver anti-viral cocktail treatment to persons in Sub-Saharan Africa. Yes there are still issues with cost and logistics, but these are not issues of technology, they are issues of politics and priority.

for the first time virtually everybody on the planet can communicate directly with virtually everybody else on a near-instantaneous basis.

And at zero marginal cost, keep in mind. Back in the ’70s it was “easy” to keep in touch with collaborators in Europe – you just had to be willing to pay astronomical international long distance phone rates. Now, with Skype and the like, having a “phone” conference with international collaborators is no big deal. Outside of the timezone issue, setting up an international meeting is about the same as setting up a meeting of people within the same building – at least with respect to cost and hassle.

Many things related to computers are like that. Putting together budget projections used to be a herculean effort by a team of accountants – now it’s a single secretary with a copy of Excel. (Or think about putting together a publication.) I think it’s a rather short-sighted definition of “productivity” that doesn’t capture that.

The downside of increased networking communication at reduced cost is that now the airwaves are full of fake news, fraudulent papers, pointless tweets and other crap. Exponentially increasing quantity has led to exponentially decreasing quality and signal to noise. There is so much crap out there now, that we’re better off closing our eyes and ears completely so that we can go out and enjoy life while it lasts.

Having all the sources that present themselves as “news”, even the tabloids, give equal time and presentation to retractions AND requiring them to do retractions on previous stories/articles would do the job nicely.

Getting something like that through Congress and signed by the President is the real problem.

OK, I’ll bite. If it’s government regulation of the press that you want, my modest proposal is for the Open Source Journalism Law. This law would mandate the following:

– Before an article is written, its proposed topic must be registered with an independent agency.
– The names and contact info for all potential sources must be included.
– Full transcripts of all interviews with sources must be included with the article as Supplementary Information.
– The article must be published whether or not it supports the author’s preconceived thesis.

Admittedly, the pesky First Amendment might be a barrier to enforcement of such a law. But in today’s culture that regards verbal disagreement as microaggressions requiring safe spaces, repeal should not be too difficult.

The complexity of what we’re dealing with has only recently become apparent. Life was simple when there were just ion channel neurotransmitter receptors. Now we know that there are metabotropic neurotransmitter receptors, which are fiendishly complex in their interactions. The current Nature (vol. 540 pp. 60 – 68) should be read by drug researchers (they probably already are aware of most of it). It concerns the metabotropic receptors for the major CNS neurotransmitters, glutamic acid and GABA.

Look at tables 1 and 2 which list the ‘interactome’ (awful word) of the GABA[B] receptors and mGluRs 1 – 5 — well over 20 in each table. Modifying this hasn’t been and won’t be simple

These specific complexities have been known for a while within the CNS community – at least a good part of it. I’d say years…
Some colleagues have tried to tackle this the way true scientists do: by building new hypotheses, testing them, trying to uncover new knowledge that makes a difficult problem more solvable.
Unfortunately, others have continued wasting resources conducting experiments based on outdated, failed models. Thus, we are wasting significant resources and delaying progress.
Yes, change is hard for everyone…

We’ve been modifying these interactions all the time – we just didn’t know that that was what we were doing. I have absolutely no doubt that our current knowledge is partial and in 20 years our understanding of these systems will have entirely changed. Again. I don’t think this makes drug development any more or less difficult, just very unpredictable in the usual way.

Derek that you see more and more old ideas being recycled under a new facelift is a sign of experience…or getting old! The world is not out of ideas. Bigger companies like Sanofi probably are. They gradually die because they increasingly center on increasing profits, share buy backs and cutting costs and getting rid of silly expensive R&D. But that is nothing new either. Perhaps the increasingly myopic focus on this and the recruitment of CEOs who value this beyond anything else is a reflection that Wall Street and shareholder obsession with earnings has excacerbated the problem. The Great Stagnation is a great book in that it identifies the increasingly narrow groups of people benefitting from innovation. But it runs out of steam after the first few chapters. Cowen has no feasible answers or solutions to the problem.

The problem with the pharma space is exits. Especially when IPOs are moribund the only buyers for innovation ARE the big companies/multinational. First, there aren’t many of them to do the buying. And second, they only buy innovations that fit in with their antiquated 20th century business models.

Passerby: Thanks for the reference. Tons of stuff in clinical trials as of the date of the review (2014). Any idea how they turned out? The one drug actually in clinical use attacks a tripeptide we’ve known about for years (RGD. Impressed with the sophistication of the work being done.

The major issue isn’t the lack of new ideas it’s the criterion by which those ideas are being judged. As pharma companies grew into larger and larger monstrosities by accretion their bottom line requirements grew as well. A new idea might be great but if it doesn’t lead to a multi-billion drug then it won’t affect stock price and isn’t of interest to large pharma. As a result, lots of new ideas never go anywhere because they’re killed by the BD guys and by the need for huge Ph3 trials that are out of reach for smaller companies. The only way to break out of this logjam is to break up the large pharma companies into smaller more aggressive companies that are satisfied with smaller pieces of the pie and allow for innovation to occur that isn’t stifled by the need for huge profits.

Several (more than 10?) years ago, there was an editorial in Technology Review that basically said that there isn’t a shortage of ideas; there is a shortage of funding for all of the good, new ideas. There isn’t an innovation shortage; there is a shortage of support and funding for innovation. I agree to some extent.

Some of the shortage is due to the allocation of resources to ideas that are, IMO, not innovative at all or flawed in some other way (Theranos). People who fund “innovation” (VC, NIH?, etc.) often avoid high risk and true innovation and rather invest in Big Names, Powerful People, or Thought Leaders. The leavings for others is rather limited. (“Thought Leaders” in drug disco have led the industry to some huge failures.)

Everyone here knows how difficult it is to make — errr, “innovate” — a new, FDA approved drug. I have heard investors, oblivious to any scientific merit, ask about the proposer, “But has he made a drug?” as if “past performance must surely guarantee future success.” Better (IMO) projects die while celebrity projects get the funding.

I have been to many “innovation fairs” at different universities. IMO, a lot of what I’ve seen seems to come from a few months of undergrad or grad research and is pretty poor and far from innovative; sometimes thought provoking, but not innovative. The students don’t always know the background, literature or prior art in the field of their projects. Many colleges and universities have well funded innovation contests, start-up programs and other means to help launch student initiated companies. Some of those have been good but many appear to me to have been forced through by powerful and connected PIs leaving better (IMO) projects to lie fallow and rot away.

I have another controversial observation about the perception of innovation and success. In the USA, many students with good ideas graduate with considerable student debt. They do not have the resources and cannot afford to start a new company on their own. Many foreign students and post-docs arrive in the USA debt-free except for the cost of their airfare. They are less fettered to take a risk on a start-up and they also know that they can always go back to their home country which almost always has a lower cost of living and reasonable, if not great, job prospects. (I personally know one fellow who ran out on debt, back to his home country and is untouchable by collectors.) They have a safety net, of sorts. This creates the false (IMO) appearance exploited in the press that “Americans” are not innovative and we need to increase the number of visas for foreign scientists.

I think that there are A LOT of innovative ideas out there, right now, and that we just don’t know how to properly choose, support, and promote them. Or maybe we do know how to make better choices but the people holding the money make their decisions differently.

@Anonymous I think your comments here are spot on (as are @hap) If you think about the flattening of the world and millions (if not more) of new minds getting educated, it seems preposterous that we are out of ideas…indeed ideas are going to continue to flourish.

My experience is the same as your in academia in terms of how innovation works and some of the naivite. I think the problem in biomedicine is the cult of personality in science and KPIs, the diminishing pool of true visionaries in industry who are connected enough to research and have any power, the limited number of funds for early stage ideas and the lack of an avenue for ideas that don’t fit the existing businesses of the multinationals.

Most of the time it are older people (over 50) who claim that the world is out of ideas. Case in point “Greg Ip” of the WSJ article is from 1964. Rarely do I hear young people say that they are out of ideas.

Does the current seasonal flu vaccine show up on the 20 most prescribed drugs list? Would a universal flu vaccine? What about the HPV vaccines?

I’d be more interested in the 20 drugs that have been administered to the most people, rather than counting ones where the same person needs to get a prescription over and over once per time they need it. I’d guess that more people are presently affected by Gardasil than Lipitor, but that Gardasil is less frequently prescribed.

It seems to me that a more innovative drug is more likely to have a lasting effect, and therefore be needed less often.

I don’t see us ever running out of ideas, but I do believe we will reach a point where it is no longer worth pursuing them, as the incremental benefits get smaller and smaller at increasing cost due to the law of diminishing returns.

I also believe that the advancement of knowledge will slow down to a halt as the incremental increase in our understanding gets smaller and smaller at increasing cost as the signal to noise decreases with increasing complexity.

Perhaps we are reaching those two crisis points now, resulting in slowing economic growth before terminal decline?

You nailed it in two, Derek: “This is partly correct, but partly misleading. The article itself goes on to mention some good reasons why – some of the innovations are doing good in ways that don’t show up in GDP (such as cleaner air and water), and some of them take a long time to kick in (for example, it was decades after the electric light bulb that electricity really began to make a noticeable difference in the economy).”

I’m going to be courageous and say that microcomputers have barely begun to transform society. When they do, we’ll realize economic expansion isn’t measurable solely, or even mainly, by expansion of physical capital, but intellectual capital. Even now, companies are monetizing intellectual property as never before. People will develop “lives of the mind” to a greater extent because that’s where the money is – in being able to work smarter, play smarter, live smarter.

The wellness revolution hasn’t really taken off, either. What happens when most of the country realizes that sugar and cheap carbs really are “the new tobacco,” and that merely watching what you eat and how much of it is worth all the billion-dollar drug development programs in Big Pharma? There’ll be some bumpy road for the medical industry in general as demand for insulins and hypoglycemic agents drops off dramatically. But there are plenty of unmet medical needs, and physicians and other caregivers will retool to meet them.

Cheap energy – and I mean damn cheap energy – is another imponderable. Getting off the carbon teat is desirable regardless of what you think about global warming. But there are obstacles, some of them because Big Physics has itself stood in the way of development of commercially-successful nuclear fusion – by insisting big-iron thermonuclear fusion’s the way to go. That’s a political decision, not a scientific one. Fortunately, Boeing and Lockheed Martin each have good programs in electrostatic fusion power, because it’s the kind you can actually haul around in ships and even put in larger aircraft.

Wars will still break out, and some of them will show how half the world will be stuck counting physical capital as a measure of economic growth, just as Japan felt it had no alternative, once it lost access to raw materials, to declare the Greater Asian Co-Prosperity Sphere and grab the raw materials it needed in the 1930s, and Germany decided it needed to do much the same thing in Europe.

We may discover we can survive a nuclear war because there’s not much choice, once the Nuclear Club hits fifteen or twenty members, including some of the economic powerhouses of the western Pacific and new players. What happens when the Congo gets an epiphany and imposes government good enough to develop its natural resources at home, and it decides to keep score by counting physical capital? You could see nuclear tripwires strung across the Sudan, the Maghreb, and all along the sub-Saharan region, because… greed and tribalism.

Microcomputers, quantum computers, and supercomputers redefined (I’m typing this note on a quad-core system with capacities that would have blown away “mainframes” from the 1970s) are another sort of capital we’re not even counting properly now,

I learned during my sojourn in Big Pharma’s decision support sphere that the real disruption will be when quantum computing and nanocomputing go commercial – and knock the floor out from under the size and power requirements for what we now consider massive computing capacity. That’s when we’ll be able to physically model the human brain in hardware, with neuristors which have the awesome net of synaptic connections and capacity to cascade cognitive activity most of us take for granted between our ears. And when we do it in nanoware, we won’t need to use cryogenics to cool the new supercomputers off, because power requirements per gate will drop dramatically.

Counting physical capital in the not-distant future may involve diving down the rabbit hole of nanotechnology and discovering (as Richard Feynman said in the 1950s) “There’s plenty of room at the bottom!” Mankind may discover (just in time) that it’s not how much you have, but how efficiently you use it.

They go to small companies cause they know their own people are inept.
Take a look at Novartis, all the money they have, facilities etc and they have managers that say things like “any compound purified by RP HPLC is too polar to be a drug”.
The executives are stymied, no matter how much money they throw at the problem they simply can’t get good people to work for them.

Wow. I’ve encountered very few compounds that can’t be purified by some form of RPLC wizardry. If it’s reasonably soluble in compatible solvents it can generally be done… if not, it’s probably not destined to be a drug in the first place.

“Rather than a symptom of general played-outness, seeing big drug companies doing deals with smaller outfits is a sign that everything is working as it should.”

I once worked for a big company, in an “exploratory research” department. We had a hard time gaining traction for some ideas which might have been good, but that had to start small. Even past great successes for the company that had had to start out small didn’t alter the general disinterest in ideas which would have to be proven on a small scale first, and developed over time. ”

From this I inferred that “big companies can only do big things.” Big” here means capital-intensive. Agile R&D is more easily done by small companies, some of which are started as do-or-die efforts based around a particular technological or scientific idea. Start-ups that fail don’t seem get the same bad press as big-pharma gets when an internal drug-discovery project fails. When a do-or-die startup fails, everyone shrugs and goes on, and says “at least they tried” (unless the fraud or other bad stuff was involved, as at Theranos).

In the industrial (as opposed to the pharma) world, relatively few large companies do small thing things well; 3M comes to mind.

But still, in pharma, if the basic principle holds, what big pharma should be best at is big, expensive projects, like running clinical trials, manufacturing, distributing and selling drugs on a large scale, dealing with the plethora of gummint-imposed regulations and certifications, and selecting target areas they feel will bring home the gravy.

Thus, I agree with Derek that it just might be that relegating early- and mid-stage drug discovery and optimization to small firms really makes a lot of sense for the whole industry, with the caveat that a 3M might still emerge out there.

That’s the point I was trying to make earlier – big pharma is just so big that it stifles innovation. Unless you have a multi-billion dollar idea it won’t get traction. But the criterion used is a market analysis even though that methodology is terribly flawed (e.g., Cha et al. Nature Rev Drug Disc 12:737, 2013). Pharma trying to innovate is like Gulliver trying to not step on the Lilliputians.

One downside of the “buy in everything” model for Big Pharma is that it helps a lot with due diligence for the company on the buying side of licensing deals to have an organization that has experience taking compounds all the way from Lead Discovery to the clinic and Approval. A large pharma’s pipeline should be a mix of own drugs and in-licensed, and for targets with various degrees of novelty. You know few of your bets will pay off, so you need to spread them around. But for managing a portfolio there’s no substitute for people who have seen the whole thing from soup to nuts.

And, as I can testify from my own experience, even if you have taken multiple compounds all the way, there are still gonna be plenty of surprises.

GDP is NOT a measure of welfare, as its inventors and producers will tell you if asked. It is a measure of the market value of economic output. We all want a measure of welfare also, but it turns out that there are plenty of drawbacks to most of the proposed ones out there. A big component of welfare unmeasured by GDP is “consumer surplus,” the gap between what something is worth to a consumer versus what they actually have to pay for it.

The closest thing to a welfare correction of GDP is the use of “hedonic” adjustments to price indices. If your computer today does 10X as much as your computer a decade ago, even if both sell for the same unit price, then the price deflator ought to correct for that–each unit of performance has plummeted in price by 90%. These corrections are tricky to do; a change in market structure and Intel pricing policies after the collapse of AMD seemed to badly underestimate price drops in microprocessors for example. The differing estimates one sees for the value of free media on the Internet are closely related to these welfare-vs.-GDP disputes. One group of analysts thinks that the consumer surplus from Facebook and Google users ought to be used to make a hedonic adjustment to GDP, while more-traditional economists do not. There are wildly varying estimates for the consumer surplus attendant on social media, where users spend lots of time on it without paying anything. Optimists such Brynjolfsson and Oh (2012) estimate much larger numbers than pessimists Nakamura, et al (2016) at the Fed and Bureau of Economic Analysis because they make different assumptions. Here are the latter:

“In 2013, we estimate that online entertainment added $19 billion to the U.S. GDP. This is not a trivial amount, but it is far lower than alternative estimates. For 2011, Brynjolfsson and Oh (2012) estimated a value of $376 billion based on time use data.11 The Boston Consulting Group (Dean et al. 2012) estimated a value of $500 billion in 2011, based on consumer surveys and an economic model. The much higher numbers are a consequence of different methodologies. Both studies use indirect methods to estimate the consumer utility gained from leisure time spent online. However, this paper is trying to estimate only the cost of producing online media. There are many areas of the economy in which consumer spending on an activity is much lower than total utility for that same activity. For example, sleeping occupies about one-third of total time and provides enormous utility, yet beds represent a very small fraction of consumer spending.

On the other hand, our estimates are consistent with preexisting estimates of the consumer value for high-speed Internet. In 2006, Greenstein and McDevitt (2011a) estimated that U.S. households received $20 billion to $22 billion of value from broadband Internet. In comparison, we estimated that U.S. households enjoyed $7 billion worth of advertising- supported online entertainment in 2006.12 This $7 billion excludes consumer utility from nonadvertising online activities such as Wikipedia and Skype. It also excludes the value received by self-employed individuals who use residential Internet for business purposes and home owners who use their Internet to research do-it-yourself home repair. We do not know the value of these activities, but it seems plausible that adding them would raise our numbers enough to be in the same ballpark as Greenstein and McDevitt (2011a).”

And in other news, Lenny Guarene’s Elysium just put up a press release about the company’s 8 week Basis trial in summer. 120 healthy people aged 60 to 80 received either Basis at the recommended dose of 250 mg NR and 50 mg of pterostilbine, a double dose of 500 mg of NR and 100 mg of pterostilbine or a placebo. The first group had NAD+ levels in blood increase 40% and in the second group by 90%.

There is a fundamental point that has been largely overlooked – for the first time, the economy is now producing everything we need (Keynes was, incredibly, right about the future. He was wrong about how we’d be spending it.; Washington Post newspaper, May 12, 2013). There is no longer any good reason for the economy to grow faster than population growth (and a very good reason for it not to, considering that we’ve already blown past the safety limits for altering the planet (www.sciencemag.org/content/347/6223/1259855)). The focus needs to shift from economic growth to economic sustainability. Wealth is no longer a valid measure of how advanced society is (just as food production no longer was once agriculture became established).

As usual, I am pretty much in agreement with Hap and Snaw. However, I would like to point a bit towards the link between outsourcing and short-term-ism (and the hidden costs they bear).

(Rant mode on…)

Outsourcing is a vital part of doing business, particularly when you are a small(er) outfit that does not have the necessary resources in house. It can also hurt a lot when you do not have the necessary experience in-house to set it up and monitor it (see Snaw’s comments as well). The time and resources necessary to manage the outsourcing should not be underrated either. However, these factors are greatly overshadowed by another, more invisible cost.

The further a project progresses (and especially if it reaches the market), the more important the hands-on know how in the project becomes. These are the practical things that can almost be make or break for some things. When this work is done in-house, then the knowledge exists in-house. However, when something is outsourced, it is most likely that much of this know how will be lost, or worse, in some cases, end up in unwanted hands. This is a cost that can directly (and significantly) affect the earnings from a product on the market, and thereby very important. However, in my experience top leaders are totally unaware of this cost (or, if they are, deny it or downplay its significance).

Which comes back to short-term-ism. Outsourcing can give significant short-term benefits, at the cost of very significant later losses. Therefore, there is a significant incentive for directors to take the easy short-term solution, and not worry about the longer term implications (they may not be around then, so why worry???). One suggestion to help this would be to tie bonuses etc, not to short-term goals (like immediate share prices), but to longer term goals. My thought is something along the lines of share prices in 10 years time. Maybe a bundle, where 10 % of the bonus was share price after 1 year, 20 % after two years, 20 % after 5 years, and 50 % after 10 years. However, I doubt that many top leaders would accept such a package. Furthermore, the current short-termism in the markets would probably preclude pressure being put on them to accept. But my opinion remains that short-term bonuses in an industry where 5 years is the blink of an eye in the life of a project/candidate/product, incentives to punch people out of short-termism and into long-term investment is necessary.

What never gets discussed in articles like this is the drag that governmental regulation has on innovation. How many “great ideas” do you think have been stopped in their tracks by regulations – probably a lot, and most of them you’ll never hear about. It’s not just whether you can do something or not, it’s whether you can do something in a reasonable amount of time. Example: There is a railroad bridge over the Susquehanna river in MD that needs to be replaced. The estimate is that it will take 10-12 years for the regulatory paperwork to be completed. There needs to be, for example, a environmental impact study for this project, even though in involves REPLACING the current bridge. Why? There has been a bridge on this site since the early 1900s. Note that the Transcontinental railroad was built in less than 3 years, back in the 1860s…

Example: Want to open a micro-distillery? Expect to wait 3 YEARS for the necessary permits from all the nice government bureaucrats at BTF. Why does it take three years to approve someone to make a legal product?

I don’t know how to make this happen, but if you want innovation and a thriving economy, have more regulation is not the way to get it, that is clear.

There is a place for regulation, especially when it comes to Things I Will Work With That Others Don’t Want To Be Exposed To. In one of Max Gergel’s books, he tells a story of someone he knew doing chemistry R&D in his apartment kitchen. Something went wrong (smoke? foul odors?) and the police came to look for the problem, To avoid being caught, he dumped everything down the drain and there were injuries, I think even a death, but the culprit was never caught.

I know people who started an illegal biotech in a (home) garage. They had been laid off from Big Pharma and took the risk. Suspicions were raised when their electric bill went thru the roof (those -80s suck a lot of juice!) and they had to upgrade the home wiring. I think they told people they added a heated Jacuzzi or something. They didn’t kill or contaminate anyone (as far as we know) and were never caught and eventually obtained funding to move into real, regulated space.

If you want to do legal organic chemistry, you might be required to file forms and get permissions from 50 or more agencies (Fed, State, Local EPAs; Fed, State, Local Hazardous Waste; Fed, State, Local OSHAs; etc.). Add more stuff to your lab (radioactives, biologicals) and the number of permits can easily top 100.

What bothers me is the uninformed public perception of how easy it is to innovate and create a startup. Everyone knows a 12 year old kid who started a company (at the kitchen table) … “So why can’t you?” The public watches Shark Tank and confounds those lo-tech, dog biscuit, copy-cat internet sales companies with hi-tech laboratory research-based innovation (cf., software / electronics innovators who also get to work at the kitchen table w/o regulatory restriction).

I confess to being jealous in some — maybe MANY — ways, but Lori Griener’s wealth came from design patents on jewelry boxes that she convinced major stores to sell. Daymond John started FUBU by sewing clothing at home. His break was getting celebrities to showcase his stuff. I don’t need a logo on my hat to keep my head warm. To restate an old joke: Q: What’s the difference between a Martha Stewart towel and a similar Cannon towel? A: $10. (And according to Consumer Reports, the Cannon towels are better than the Martha Stewart towels.)

But I am faced with people who say, “Just do it!” Yet they nearly collapse in disbelief when told the real costs of doing legal chemistry research.

We need sensible, common sense regulation to foster innovation while protecting people and other public interests.

I’m not sure you made a great case. I certainly don’t want to be living next to someone who violates fire codes by overheating their wiring or cooking up organics in the apartment next to me without a proper fume hood, ventilation, etc. The fact that someone died because a do-it-yourselfer poured poison down a home sink doesn’t quite support your thesis either. We may be over-regulated in some areas but everytime there’s been massive deregulation there’s been a concommitant economic meltdown – savings and loans under Reagan, mortgage fiasco under Bush, etc.

The kitchen chemist should have abided by the laws and not been doing illegal and unsafe R&D in his kitchen. Chem R&D should be regulated appropriately.

My bigger point is that the public and even some potential investors are unaware of the costs of doing legal chemistry R&D as compared to programming a computer game or designing and building the next “smart” device to perform some unimportant task or designing a jewelry box.

Now that I think about it … what used to be “hobbies” or “home crafts” has been renamed “Maker Movement.” Some Makers have bought their own inexpensive 3D printers. Some of those printers give off fumes that I think are self-regulated as “use in a well ventilated area.” But some fused plastics can be pretty nasty and at some point government regulations might criminalize and move 3D printers out of kitchens, basements and garages and into expensive, regulated space.

To repeat … I am fine with appropriate regulations. I want others to be aware of the added costs before telling me to “Just do it!”

Well, the cure for Alzheimer is in the sight.http://www.bbc.co.uk/news/health-38220670
or at least what Harvard professors say.
Interestingly, if the frequency goes away from 40 Hz, it has opposite effect (original Nature paper). Now, the classic TV uses 60 Hz and the modern is as high as 240 Hz…

MAYA = Most Advanced Yet Acceptable was coined by Raymond Loewy, pre-WWII (I think; haven’t found the exact year). Later studies confirm the concept and a Harvard group did a study that demonstrated that it applied to scientific research proposals, too. Bold new ideas do not get funded; incremental (less innovative) advancements stand a better chance.

There is an old joke (well, maybe not a joke) about the TV Executive who told the writers to come up with some new shows that would be totally new and different and not the same old stuff. When presented with numerous options, he complained, “None of this will do. I want something new, but make it like I Love Lucy [or Gunsmoke or Cheers]!”

VC, NIH, NSF, Angels, newspaper and magazine writers … they want NEW and INNOVATIVE, just not TOO new or TOO innovative. (I guess that leaves DARPA and a few other places.)